For years, social enterprises struggled to find the right kind of investment. They could get small grants to start, and larger loans once they were big. But there was a gap for those in the middle. These were organizations with proven social impact and modest income, looking for money to grow.
A 2017 report highlighted this issue. It said social enterprises were "finance-hungry." Getting the right money at the right time was a major challenge. The report suggested focusing on smaller, unsecured, and more patient finance. This included money for working capital, cash flow, and diversifying income.
Good news arrived with the final evaluation of the Growth Fund. This fund offered a mix of grants and loans, up to £150,000, to smaller organizations. It successfully filled a crucial gap in the social investment market.
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Start Your News DetoxThe Growth Fund's Impact
The Growth Fund made £50 million available. National Lottery players contributed £22.5 million. Better Society Capital added £27.5 million from unclaimed money in dormant bank accounts. Access delivered the program, working with 15 social investors.
From 2016 to 2023, the fund made 780 investments. These went to 580 voluntary, community, and social enterprise organizations (VCSEs). About half of these had never sought investment beyond grants before. The evaluation report found that the grant portion was a key motivator for applicants.
The Growth Fund successfully addressed the "missing middle" for small and medium VCSEs. The average investment was £67,000. Most funded organizations had an annual income of about £177,000. Fifty-four percent had fewer than five full-time employees. Only 12% had more than 25 full-time staff.
Organizations typically used the money for growth. This included scaling activities, buying assets, diversifying income, and staff development. It also helped reduce reliance on grants and boost financial reserves.
A survey of recipients showed positive results. Fifty percent of VCSEs reported significant improvements in financial resilience. Over 70% said the investment increased their social impact and the number of people they helped.
Beyond helping VCSEs, the Growth Fund also grew the social investment market. Seventy percent of surveyed organizations applied for more investment after their Growth Fund loan. Eighty percent would recommend social investment to other VCSEs.
Access distributed funds to various regional social investors. Seven of these funds were managed by experienced investors. Ten were managed by organizations new to loan book management. Half of these new managers continue to offer blended finance, while the other half are no longer active.
A Lasting Legacy
The Growth Fund led to more blended finance programs. One example is Access's £50 million Enterprise Growth for Communities program. This successor to the Growth Fund is backed by £20 million in grants from dormant assets. It continues to offer simple, largely unsecured blended finance products. Access has also received another £87.5 million in dormant assets, with £41 million for blended finance funds.
Neil Berry, Director of Programmes at Access, noted the fund's importance. He said the Growth Fund was key in showing how blended finance can help smaller charities and social enterprises.
Berry added that the Growth Fund was not a one-time effort. It was the start of ongoing support. This ensured that appropriate finance remained available. He stated it has been a "springboard" for much of their later work. At least half of the finance Access supports is small-scale unsecured debt.
Please note: Access funds social investors and intermediaries, not charities or social enterprises directly. If you are a charity or social enterprise looking for social investment, visit Good Finance.
